SBC Medical Group Holdings (SBC) risk factors, FY2025 10-K

Risks Relating to Our Business and Industry

1. 01We are a holding company and depend upon our operating subsidiaries for our cash flows
2. 02We may need additional capital, and we cannot be sure that additional financing will be available24% rewritten
3. 03We may not grow our franchise system or we may lose business by failing to compete effectively or by failing to manage the reputation of our brand
4. 04The financial performance of our franchisees and other alliance partners can negatively impact our business26% rewritten
5. 05The interests of our franchisees and other alliance partners may conflict with ours or yours in the future and we could face liability from our franchisees and other alliance partners or related to our relationship with our franchisees and other alliance partners
6. 06We could face liability from or as a result of our franchisees and other alliance partners
7. 07We have limited control with respect to the operations of our medical corporation customers, which could have a negative impact on our business
8. 08The relatives of our CEO account for two-thirds of the general meeting of members (or shain), which is the highest decision-making body in these MCs
9. 09The challenging economic environment may affect our franchisees, with adverse consequences to us
10. 10Our success depends in significant part on our and our licensees’ ability to establish, maintain and protect patents and other intellectual property rights and operate without infringing the intellectual property rights of others
11. 11We have substantial franchisee concentration
12. 12Our reputation and the trading price of our common stock may be negatively affected by adverse publicity or detrimental conduct against us
13. 13We are a relatively young company with a short operating history, and we may not be able to sustain our rapid growth, effectively manage it or implement our business strategies
14. 14If we fail to address any or all of these risks and challenges, our business may be materially and adversely affected
15. 15Our franchisee and other alliance clinics may not be successful in competing in the cosmetic clinic industry20% rewritten
16. 16The Company may face competition from senior management who cease working for it, and the Non-Competition Agreements (as defined below) may be unenforceable and expire two years following the Closing
17. 17Any significant change in the customer reward program at our franchisee and other alliance clinics could have a negative impact on our business60% rewritten
18. 18We depend on our and our franchisees’ and other alliance partners’ operating systems to operate. Any material disruption to or slowdown of our operating systems could cause delays in our management services, which could harm our brand and adversely affect our operating results
19. 19The Company, its subsidiaries, and the MCs could be subject to breaches of security by hackers. Although we proactively employ multiple measures to defend our systems against intrusions and attacks, our measures may not prevent unauthorized access or use of sensitive data23% rewritten
20. 20Uncertainties with respect to the development, and use of artificial intelligence in our business and products may result in harm to our business and reputationNew
21. 21We may be compelled to undertake product recalls or take other actions, which could adversely affect our brand image and results of operations
22. 22We may become subject to product liability claims or warranty claims, which could harm our financial condition and liquidity if we are not able to successfully defend or insure against such claims
23. 23We have limited experience in providing management services to franchisee clinics located outside of Japan and we are subject to a variety of costs and risks due to our continued international expansion23% rewritten
24. 24a legal system subject to undue influence or corruptionNew
25. 25Our operations may be interrupted by utility shortages or stoppages, fire, natural disaster or other calamities at or near our facilities
26. 26Our business and prospects depend significantly on our ability to build our Shonan Beauty Clinic brand
27. 27Our employees, agents, business partners or subcontractors may engage in misconduct or other improper activities, which could cause us to lose contracts, expose us to damages, harm our reputation and diminish investor confidence in our company61% rewritten
28. 28Any decline in the business of our business partners or the deterioration of our relationship with them could have a material adverse effect on our operating results
29. 29Safety issues or public perceptions of safety issues concerning cosmetic services could have a material adverse impact on our business29% rewritten
30. 30If our franchisee and other alliance clinics or our clinics in Vietnam or Singapore fail to comply with environmental and work safety laws and regulations, the Company and the franchisee and other alliance clinics could become subject to fines or penalties or incur costs that could harm our business
31. 31If our business partners, independent contractors, suppliers, or franchisee and other alliance clinics fail to use ethical business practices and comply with applicable laws and regulations, our brand image could be harmed due to negative publicity beyond our own control21% rewritten
32. 32Failure to safeguard personal information could subject us to penalties, damage our reputation and brand, and harm our business and results of operations32% rewritten
33. 33As laws and regulations in Japan on the protection of privacy and data are constantly evolving, complying with new laws and regulations could cause us to incur substantial costs or require us to change our business practices in a manner materially adverse to our business
34. 34Failure by the MCs and other independently operated clinics and physicians to comply with the Medical Care Act in Japan could subject us to penalties, damage our reputation and brand, and harm our business and results of operations
35. 35We are subject to risks associated with strategic alliances or acquisitions. If we cannot manage the growth of our business or execute our strategies effectively, our business and prospects may be materially and adversely affected42% rewritten
36. 36Our business could be adversely affected by trade tariffs or other trade barriers
37. 37We and our subsidiaries have limited insurance coverage, which could subject us to significant costs and business disruption
38. 38We are involved in litigation from time to time and, as a result, we could incur substantial judgments, fines, legal fees or other costs
39. 39Any financial or economic crisis or perceived threat of such a crisis may materially and adversely affect our business, financial condition and results of operations42% rewritten
40. 40We face risks related to natural disasters and health epidemics, which could significantly disrupt our operations
41. 41If the landlords of our and our subsidiaries’ leased properties fail to properly maintain and renovate such premises, buildings or facilities in a timely manner or at all, the operation of our offices could be materially and adversely affected
42. 42The MCs may fail to pay us in accordance with the terms of their franchise and management services agreements, at times necessitating action by us to attempt to compel payment22% rewritten
43. 43Effective internal controls are necessary for us to provide reliable financial reports, prevent fraud and operate successfully as a public company. Section 404 of the Sarbanes-Oxley Act of 2002 requires that companies evaluate and report on their systems of internal control over financial reporting99% rewritten

Risks Related to Employee Matters

1. 44If we cannot maintain our company culture as we grow, we could lose the innovation, teamwork, passion and focus on execution that we believe contribute to our success and our business may be harmed
2. 45Our success depends on the continuing efforts of our key employees, including our senior management members and other key personnel. If we fail to hire, retain and motivate our key employees, we could lose the innovation, collaboration and focus that contribute to our business
3. 46The failure to attract and retain additional qualified personnel could prevent us from executing our business strategy

Risks Related to Intellectual Property

1. 47We and our subsidiaries may need to defend ourselves against claims of intellectual property infringement, which may be time-consuming and costly26% rewritten
2. 48establish and maintain alternative branding for our brand and servicesNew
3. 49Our or our subsidiaries’ intellectual property rights may not protect us effectively33% rewritten
4. 50We cannot assure you that our or our subsidiaries’ pending patent applications will be granted. Even if our or our subsidiaries’ applications are successful, patents may be contested, circumvented or invalidated in the future
5. 51The Company may not be able to protect its intellectual property rights throughout the world
6. 52If we fail to protect, or incur significant costs in defending or enforcing our intellectual property and other proprietary rights, our business, financial condition and results of operations could be materially harmed

Risks Related to Government Regulation

1. 53Failure to comply with laws and regulations could harm our business

General Risks

1. 54Weakened global economic conditions may harm our industry, business and results of operations
2. 55We are exposed to fluctuations in currency exchange rates26% rewritten
3. 56Our actual operating results may differ significantly from our guidance and projections

Risk Relating to Ownership of Our Securities

1. 57An active market for our securities may not develop, which would adversely affect the liquidity and price of our securities
2. 58Nasdaq may delist our securities from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject the Company to additional trading restrictions
3. 59The market price of our common stock may decline68% rewritten
4. 60The market price of our common stock may be volatile, and you could lose all or part of your investment24% rewritten
5. 61other events or factors, including those resulting from pandemics, natural disasters, war, acts of terrorism or responses to these eventsNew
6. 62Because there are no current plans to pay cash dividends on the Company’s common stock for the foreseeable future, you may not receive any return on investment unless you sell your shares of the Company’s common stock at a price greater than what you paid for it
7. 63The Company’s stockholders may experience dilution in the future
8. 64If securities or industry analysts do not publish research or reports about the Company’s business, if they change their recommendations regarding the Company’s common stock or if the Company’s operating results do not meet their expectations, the Company’s common stock price and trading volume could decline
9. 65Future sales, or the perception of future sales, by the Company or its stockholders in the public market following the Business Combination could cause the market price for the Company’s common stock to decline
10. 66The Company may redeem unexpired public warrants prior to their exercise at a time that is disadvantageous for the Company’s warrant holders
11. 67Our securities holders may face limitations in connection with the issuance of shares upon the exercise of our warrants, and additional state securities law requirements could apply if our securities were to become no longer listed on a national securities exchangeNew
12. 68Substantial future sales of shares of our common stock could cause the market price of our common stock to decline
13. 69If we fail to maintain effective internal control over financial reporting, the price of our securities may be adversely affected
14. 70As an emerging growth company, our auditor is not required to attest to the effectiveness of our internal controls30% rewritten
15. 71If a “penny stock” is sold to the investor in a fraudulent manner, the investor may be able to sue the persons and firms that committed the fraud for damagesNew
16. 72We believe we will be considered a smaller reporting company and will be exempt from certain disclosure requirements, which could make our common stock less attractive to potential investors41% rewritten
17. 73in the case of an issuer whose public float as calculated under paragraph (1) or (2) of this definition was zero or whose public float was less than $700 million, had annual revenues of less than $100 million during the most recently completed fiscal year for which audited financial statements are availableNew
18. 74We incur significant costs as a result of operating as a public company, and our management is required to devote substantial time to new compliance initiatives
19. 75Delaware law and the Company certificate of incorporation and bylaws contain certain provisions, including anti-takeover provisions, that limit the ability of stockholders to take certain actions and could delay or discourage takeover attempts that stockholders may consider favorable56% rewritten
20. 76These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in the Company’s board of directors or management
21. 77Anti-takeover effects of certain provisions of Delaware state law could hinder a potential takeover of the Company44% rewritten
22. 78Provisions in the Amended Charter and Delaware law may have the effect of discouraging lawsuits against the Company and its directors and officers71% rewritten
23. 79Nothing in the Company’s certificate of incorporation or bylaws will preclude stockholders that assert claims under the Securities Act or the Exchange Act from bringing such claims in state or federal court, subject to applicable lawNew
24. 80If the voting power of our capital stock continues to be highly concentrated, it may prevent you and other minority stockholders from influencing significant corporate decisions and may result in conflicts of interest
25. 81In the event that our common stock price does not exceed the exercise price of the Private Placement Warrants during the period when the Private Placement Warrants are exercisable, the Private Placement Warrants may not have any value24% rewritten
26. 82There must be a current registration statement in order for you to exercise the Private Placement Warrants62% rewritten
27. 83Holders of our Private Placement Warrants will have no rights as a common stockholder until they acquire our common stock